SMB Training Blog

End of the Month Review

I love stats. One of my favorite books is MoneyBall. Presently I am hooked on the wOBA that Rob Neyer has been blogging about. When I read rumors about the Yanks getting Sabathia or Burnett or Lowe I immediately check their important stats, such as their WHIP and strikeouts per innings. For me the idea of being able to quantify future success based upon past stats is entertaining.

Obviously I am not concerned with my WHIP. For me, as a trader, I am concerned with my win rate, the stocks I trade well, the stocks with which I struggle, most profitable time period, etc. This helps me eliminate certain trades and stocks. And as a result my numbers improve.

This past month I was net negative two days. That’s pretty good. Two of those days were the direct result of me breaking my routine. I wrote a blog about this recently. There were three trading days this month that stick out. If you look at my results they go good, good, good, good, very good, and then there are these three days that just don’t belong. During these days I overtraded during the midday and I got out of my routine. My human error was the cause of this underperformance. Next month I must eliminate these mistakes.

I thought I did a nice job of recognizing my mistakes intra-month and got back on track after those three underperforming trading days. There were no days where I really ripped it up, which is good for me. I usually have at least one or two days where I rip it up. This month there was none of that. That is some good progress made by me.

After reviewing my work it is clear that my adjustments intra-month trading GS were effective. I stopped hitting the new intraday low and started hitting high bids into explosive upmoves. Every time I hit the new intraday low in GS the stock would spike 50c. I would get stopped out. I stopped doing this. Instead I waited for GS to spike after a new intraday low and hit a high bid. I could not get GS into the upmove on the offer so I just hit a high bid. The danger of this technique is catching a reversal. And I got caught in a few, but this adjustment was profitable overall.

I was negative in only one stock that I traded this month, PG. I lost $93.75. Why was I even trading PG? I can’t even remember trading PG. And what a boring trading stock. I suspected that I traded PG on the day of my biggest rip. I was correct. When you are down you tend to try too hard, or “squeeze the bat too tightly” as Joe Torre likes to explain. And you tend to trade stocks that normally you wouldn’t. You force a trade, hoping for a chop to make back your losses. So I lost my focus and discipline trading PG during my worst day. I need to eliminate trades like this next month.

Some readers might ask: Mike why do you care about a loss of only $93.75? I don’t care about the money. But I am a professional trader. I lost my discipline when I traded PG. And that is a huge mistake. Sure the results of my lack of discipline only cost me $93.75 this month, but how much will it cost me next month?

I made the most in GS this month. I realized some nice gains in HIG. I had never traded HIG before. HIG was very active during the month. I tend to trade very fast and active stocks well even if I have never traded them before. The Stocks in Play I trade well, no matter how cheap or how much experience I have had trading them. And this makes sense. I am a trader. My advantage is my trading skills. Give me a Stock in Play, let me watch if for 15 minutes, and I will find favorable risk/rewards patterns. Next month I will not hesitate to jump into another HIG.

I still struggle with complacency. I get up early, am satisfied with my profits, and then start thinking about all of my responsibilities running our firm. I should spend the first 1 1/2 hours just absorbing the data that the market offers and stop coasting after a quick early start. Also during my worst day trading GS I let my bias dictate my trades. And for an intraday trader this is a huge mistake. If the tape shows weakness and my bias is long, then I should not get long. No one cares about my opinion in GS.

So as you can see I still have a lot to work on this month. There is no end point for a trader. There is no time where you will “finally get it.” There are just adjustments and improvement. Reviewing your work at the end of the month is helpful and necessary. But if you make these adjustments and focus on improving you can have a very long and profitable trading career.